NCREIF US Row Crop Farmland Appreciation Declines to 5.6% in Q1 2024
By: Matt Harrod
US Row Crop Farmland NCREIF quarter on quarter values cycled lower in Q1 2024 from 2.8% in Q4 2023 to 1.5% in Q1 2024 (blue line in the nearby chart). The Row Crop Farmland rolling annual appreciation rate (red line) continued its downward trend at 5.6%, down from 6.4% in Q4 2023.
Although the rolling average appreciation rate of 5.6% remains above the ten-year treasury yield as of May 3rd of 4.5%, and quarter-on-quarter farmland appreciation of 1.5% remains positive in the face of low commodity prices and a strong dollar value discouraging exports, inflation has remained stubbornly above fed target rates and has seen modest recent increases, likely preventing any further fed rate cuts and possibly requiring increases to regain control over inflation.
We tentatively expect the yearly rolling average appreciation to bottom out in Q3 or Q4 around or under 2%, allowing time for CAP rates to catch up over the next 12 – 24 months from a slide down to 3.4% in Q1 2024. It may be interesting to see if continued inflation and/or fed rate hike would reverse or delay cooling appreciation rates due to investors renewing farmland investments as a hedge against long-term inflation risk. Stay tuned!